Volvo Buying Itself Out of Chinese Joint Venture

Matt Posky
by Matt Posky
volvo buying itself out of chinese joint venture

Volvo Cars is plotting to buy out parent company Zhejiang Geely Holding and free itself of its Chinese joint venture. The Swedish (currently Swedish-Chinese) manufacturer has been hinting at the prospect of going public with an IPO, which most analysts believe would be bolstered by creating some distance from Geely.

While the Chinese Communist Party has ended mandates requiring electric vehicle firms from entering into joint ventures with established domestic businesses, the rule still exists for traditional automakers. However, the general assumption is that most will attempt to regain full ownership of their Chinese assets when the law is lifted next year. But critics are cautioning that the nation is under no obligation to maintain any commitment to foreign entities once they’ve split with their local partners.

Based upon international concerns of intellectual property theft, your author would even argue that China already has what it needs from these businesses. Why not allow them to buy themselves out of relationships and assume total financial responsibility for its facilities when the government can place whatever restrictions it wants moving forward? Perhaps I’m being too pessimistic. But China has a tendency to unapologetically do what’s best for itself and already benefited from the technological sharing required via JVs.

Then again, Volvo has said it receives a high degree of autonomy from Geely. But it also seems content with not getting any cozier and dodged a potential merger that was floated by its Chinese parent company in 2020.

While the details of the current deal have not been shared by either company. Reuters reported that Volvo would be assuming total control of factories in its manufacturing plants in Chengdu and Daqing, as well as its R&D center in Shanghai. It also speculated as to why Geely might not be terribly clingy when Volvo’s sales are dwarfed by the Germans.

From Reuters:

Volvo Cars sold over 166,000 vehicles in China last year, and its dealers are offering heavy discounts to compete with other premium brands like BMW and Audi.

The Gothenburg-based company was bought by Geely from Ford in the aftermath of the global financial crisis more than a decade ago, and has since shared ownership of its Chinese plants with its parent.

Volvo Cars said the transactions, which are subject to regulatory approval, would be carried out in two steps, starting in 2022 and seen formally completed in 2023.

“These two transactions will create a clearer ownership structure within both Volvo Cars and Geely Holding,” Geely’s CEO Daniel Li said in a statement, which did not refer to the possible IPO.

Volvo Cars has referenced the IPO on numerous occasions, however, with CEO Håkan Samuelsson previously indicating it could be underway before 2022. On Wednesday, he said his company would become the first foreign automaker to obtain full control over its Chinese operations. Geely leadership has also hinted at this, Li suggesting in June that Volvo would move quickly if placed on any stock exchange. Regardless, the two companies will still share platforms and components for the foreseeable future.

[Image: Volvo]

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  • Ol Shel Ol Shel on Jul 22, 2021

    Congratulations to President Xi and the Chinese people on the 70th Anniversary of the People’s Republic of China! — Donald J. Trump (@realDonaldTrump) October 1, 2019

  • Pig_Iron Pig_Iron on Jul 22, 2021

    Prepare for Communist chicanery. :-/

  • MaintenanceCosts We hear endlessly from the usual suspects about the scenarios where EVs don't work as well as gas cars. We never hear the opposite side of the coin. From an EV owner (since 2019) who has a second EV reserved, here are a few points the "I road trip 1000 miles every day" crowd won't tell you about:[list][*]When you have a convenient charging situation, EV fueling is more convenient than a gas car. There is no stopping at gas stations and you start every day with a full tank.[/*][*]Where there are no-idling rules (school pickup/dropoff, lines for ferries or services, city loading, whatever else) you can keep warm or cool to your heart's content in your EV.[/*][*]In the cold, EVs will give you heat from the second you turn them on.[/*][*]EVs don't care one bit if you use them for tons of very short trips. Their mechanicals don't need to boil off condensation. (Just tonight, I used my EV to drive six blocks, because it was 31 degrees and raining, and walking would have been unpleasant.)[/*][*]EVs don't stink and don't make you breathe carcinogens on cold start.[/*][*]EV maintenance is much less frequent and much cheaper, eliminating almost all items having to do with engine, transmission, or brakes in a gas car. In most EVs the maintenance schedule consists of battery coolant changes and tire maintenance.[/*][*]You can accelerate fast in EVs without noisily attracting the attention of the cops and every passerby on the street.[/*][/list]
  • MaintenanceCosts Still can't get a RAV4 Prime for love or money. Availability of normal hybrid RAV4s and Highlanders is only slightly better. At least around here I think Toyota could sell twice the number of vehicles that they are actually bringing in at the moment.
  • Tree Trunk Been in the market for a new Highlander Hybrid, it is sold out with order time of 6 months plus. Probably would have bit the bullet if it was not for the dealers the refuse to take an order but instead want to sell from allotment whether it fits or not and at thousands over MRSP.
  • AKHusky The expense argument is nonsense. My mach e was $42k after tax credit. Basically the same as similarly equipped edge. And it completely ignores that the best selling vehicles are Rams, F150s, and Silverados, all more expensive that a bolt, MAch e or ID4. As an owner, I'd say they are still in second car territory for most places in the country.
  • Johnster I live in a red state and I see quite a few EVs being purchased by conservative, upper-class Republicans (many of them Trump-supporters). I suspect that it is a way for them to flaunt their wealth and that, over time, the preference for EVs will trickle down to less well-off Republicans.
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